Pro’s and Con’s of Buying a TIC? | From Medium.com

Pro’s and Con’s of Buying a TIC? | From Medium.com

Deniz Kahramaner used to lead data projects at LinkedIn Recruiter and Accompany. He and Jeremie Young started a data initiative, helping real estate buyers, and sellers make important decisions using data. This article reposted from Medium.com is part of that initiative.

We’ve read a lot of articles about Tenants-in-common (TIC), and this one does a great job presenting the pro’s and con’s. The author pulls data from 10 years of TIC sales in San Francisco and lays out the information in charts and graphs. 

Click here to read the full article.

For the most part, the pro’s and con’s are applicable to Los Angeles TIC sales as well, with a few exceptions.

  1. MYTH: condo conversions are the main benefit of TICs. 
    The city of San Fran has removed their lottery for condo conversions, so the possibility of converting TICs to condos is no longer a driving factor. The city of LA restricts condo conversions heavily. The author lists the potential to convert condo’s as the #1 Pro of TIC ownership. However, we would argue that the #1 Pro of TIC ownership is the ability to get out of renting, and start building equity through appreciation, and through every mortgage payment.  This is a point the author did not make at all, and it’s the #1 feedback we are getting from current LA buyers visiting our TIC listings
  2. MYTH: Fractional loans have higher interest rate. 
    Sterling Bank TIC loans are at 4½%. Comparable to going rates!
  3. MYTH: Fractional loans require higher down-payment and have a higher monthly payment.Sterling Bank requires a minimum of 10% down. Not bad! The monthly payments with principle, interest, property taxes, insurance (PITA) and HOA dues of our past TICs have been equal or less to what the market rent would be. Higher payment than a condo? I have not seen a condo in recent years where you can put 10% down, rent it out and have the rent pay your PITI. TIC mortgages are affordable, and that is the appeal.
  4. MYTH: TICs have legal complexities — many of them. 
    This is not so much a myth as it is misleading. Condos have legal complexities. Buying real estate has legal complexities. There aren’t necessarily MORE with TIC’s, it’s just NEW to us here in LA. And even though it’s new for us in LA, it’s been around for 30 years in San Francisco.                                                            
  1. MYTH: condo conversions are the main benefit of TICs. 
    The city of San Fran has removed their lottery for condo conversions, so the possibility of converting TICs to condos is no longer a driving factor. The city of LA restricts condo conversions heavily. The author lists the potential to convert condo’s as the #1 Pro of TIC ownership. However, we would argue that the #1 Pro of TIC ownership is the ability to get out of renting, and start building equity through appreciation, and through every mortgage payment.  This is a point the author did not make at all, and it’s the #1 feedback we are getting from current LA buyers visiting our TIC listings

  2. MYTH: Fractional loans have higher interest rate. 
    Sterling Bank TIC loans are at 4½%. Comparable to going rates!

  3. MYTH: Fractional loans require higher down-payment and has a higher monthly payment.

Sterling Bank requires a minimum of 10% down. Not bad!
The monthly payments with principle, interest, property taxes, insurance (PITA) and HOA dues of our past TICs has been equal or less to what the market rent would be. Higher payment than a condo? I have not seen a condo in recent years where you can put 10% down, rent it out and have the rent pay your PITI. TIC mortgages are affordable, and that is the appeal.

  1. MYTH: TICs have legal complexities — many of them. 
    This is not so much a myth as it is misleading. Condos have legal complexities. Buying real estate has legal complexities. There aren’t necessarily MORE with TIC’s, it’s just NEW to us here in LA. And even though it’s new for us in LA, it’s been around for 30 years in San Francisco.

Sterling Bank requires a minimum of 10% down. Not bad! The monthly payments with principle, interest, property taxes, insurance (PITA) and HOA dues of our past TICs have been equal or less to what the market rent would be. Higher payment than a condo? I have not seen a condo in recent years where you can put 10% down, rent it out and have the rent pay your PITI. TIC mortgages are affordable, and that is the appeal.

The rest of the article is fantastic, and provides very useful information. We highly recommend checking it out. 

Please refer to a few charts from the article
:

Median prices of TICs compared to condos from 2007 and 2017(

How Cheap (in Percentage) were TICs Compared to Condos Between 2007 and 2017?

Number of Days Condos and TICs were on Market Between 2007-2017

Let us know your thoughts after reading the article!

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